JEFFERSON COUNTY BOARD OF EDUCATION LOUISVILLE, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor JEFFERSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 JEFFERSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULEOFSTATEREVENUE 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 23, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Jefferson County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Jefferson County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Jefferson County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Jefferson County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-l l As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Jefferson County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. In accordance with Government Auditing Standards, we have also issued our report dated June 23, 2004, on our consideration of the Jefferson County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Jefferson County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Pro.fit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2003-34ARL-1 l A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:gp 2003-34ARL-11 Russell W. Hinton State Auditor JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The discussion and analysis of the Jefferson County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance. Financial Highlights Key financial highlights for fiscal year 2003 are as follows: The Governmental Accounting Standards Board (GASB) issued GASB Statement 34 on June 30, 1999, requiring governments to comply with a new reporting model for financial statements. Based upon total revenues, the Jefferson County Board of Education was a Phase Two implementer, and was required to implement GASB Statement 34 beginning in fiscal year 2003. Due to this being the implementation year for GASB Statement 34, many comparisons are not available that will be available for fiscal year 2004. The Board's financial status remained stable during fiscal year 2003. In total, net assets increased less than $1.5 million, which represents a small increase from fiscal year 2002. This total increase was due to governmental activities since the Board has no businesstype activities. General revenues accounted for $9.0 million in revenue or 31 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $19.7 million or 69 percent of total revenues. Total revenues were $28. 7 million. The Board had $27.2 million in expenses related to governmental activities; only $19.7 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $9.0 million were adequate to provide for these programs. Among major funds, the general fund had $26.6 million in revenues and $26.2 million in expenditures. The general fund's balance increased to $4.0 million from $3.6 million. Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Jefferson County Board of Education as a financial whole, or as an entire operating entity. JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds with all other nonmajor funds, if any, presented in total in one column. In the case of the Jefferson County Board of Education, the general fund is by far the most significant fund. Reporting the Board as a Whole Statement ofNet Assets and Statement ofActivities While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2003?" The Statement ofNet Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis ofaccounting similar to the accounting used by most privatesector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity: Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others. Reporting the Board's Most Significant Funds Fund Financial Statements Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the general fund, the district-wide capital projects fund, and the debt service fund. 11 JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunds is reconciled in the financial statements. Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. The Board as a Whole The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2003. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available. 111 JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets Governmental Activities Fiscal Year 2003 Assets Current and Other Assets Capital Assets, Net $13,475,015 26,060,359 Total Assets $39,535,374 Liabilities Current and Other Liabilities Long-Term Liabilities $ 4,428,291 10,215,000 Total Liabilities $14,643,291 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $18,165,865 3,359,235 3,366,983 Total Net Assets $24,892,083 Table 2 shows the changes in net assets for fiscal year 2003. Since this is the first year the Board has been required to prepare financial statements following GASB 34, revenue and expense comparisons are not available. IV JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Increase in Net Assets Governmental Activities Fiscal Year 2003 $ 291,627 19,033,113 409,226 $19,733,966 $ 4,480,664 1,646,807 2,175,558 157,226 537,606 $ 8,997,861 $28,731,827 $16,509,506 951,704 744,424 472,356 750,208 1,659,600 335,633 1,771,951 1,227,259 71,705 376,960 108,813 1,630,905 621,910 $27,232,934 $ 1,498.893 V JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Activities Instruction comprises 61 percent of governmental program expenses. Interest expense comprises 2 percent of governmental program expenses. Interest expense was attributable to the outstanding bonds for capital projects. The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2002 are not available. Table 3 Governmental Activities (in Thousands) Total Cost of Services Fiscal Year 2003 Net Cost of Services Fiscal Year 2003 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Service Food Services Interest on Short-Term and Long-Term Debt $16,509,506 $ 3,024,815 951,704 744,424 472,356 750,208 1,659,600 335,633 1,771,951 1,227,259 71,705 376,960 595,130 278,121 186,398 128,194 993,328 335,633 820,499 408,803 71,705 125,312 108,813 1,630,905 621,910 -15,611 -75,269 621,910 Total Expenses $27,232,934 $ 7A98,968 Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 18.3 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 27.5 percent. Vl JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The Board's Funds The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $34.7 million and expenditures and other financing uses of $36.5 million. There was a decrease of $2.3 million in the capital projects fund due to capital funds on hand being expended. The general fund had an increase of $.4 million and the debt service fund had an increase of $.02 million. The positive change in the fund balance of the general fund for the year indicates that the Board was able to meet current costs from current revenues. General Fund Budgeting Highlights The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2003, the Board amended its general fund budget as needed. The Board uses function-based budgeting. The budgeting systems are designed to tightly control total function budgets but provide flexibility for site management. For the General Fund, Budgeted revenues decreased from $27.0 million to $26.8 million. Expenditures Budgeted decreased from $26.9 million to $26.7 million, these changes are inmaterial and were caused by changes in state funded programs with in the general fund that were decreased by the state. Capital Assets and Debt Administration Capital Assets At the end of fiscal year 2003, the Board had $26,060,359 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2003. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, capital asset comparisons to fiscal year 2002 are not available. Vll JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 295,348 2,865,987 20,145,913 1,636,411 1,116,700 Total $26,060.359 The primary increases occurred in Improvements and in Construction in Progress. Due to the slow growth in the county, the Board has thru SPLOST, continued to maintain and improve its plants. Debt At June 30, 2003, the Board had $10.2 million in bonds outstanding with $.6 million due within one year. At June 30, 2003, the Board's overall legal bonding authority was above any future needs. The Board maintains an A-bond rating with Moody's and an AA bond rating with Standard and Poor's. For the fiscal year 2002 the General Obligation Bonds outstanding were $10.4 million. During the fiscal year 2003, the Board refinanced its' 1993 General Obligation Bonds for $5,280,000 for a net present value savings of$247,367. Current Issues Jefferson County, and the Jefferson County School System, has suffered economic setbacks in line with a state and national economy that is declining in growth. Sales tax revenue growth is higher than anticipated, and no shortfall is expected in total collections under the current Special Purpose Local Option Sales Tax initiative. However, in spite of the economy, the county's economic outlook continuous to be healthy. The tax digest increased by 13 percent between 1999 and 2003, including growth, reassessment and reappraisals. Population growth is continuing at a very low rate. The number of building permits issued remains steady from 2002 to 2003. vm JEFFERSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact Robert L. Prescott, CPA, Chief Financial Officer at the Jefferson County Board of Education, 1001 Peachtree Street, Louisville, Georgia 30434. You may also email your questions to PrescottR@jefferson.k12.ga.us IX JEFFERSON COUNTY BOARD OF EDUCATION JEFFERSON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings and Building Improvements Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Un restricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 2,990,640 7,531,368 678,676 1,925,411 290,604 43,000 15,316 295,348 2,865,987 1,256,429 23,753,161 3,064,400 -5 174 966 $ ===3=9=,5=35='=37=4= $ 742,967 2,628,735 760,811 260,595 35,183 575,000 9 640 000 $ 14 643 291 $ 18,165,865 620,968 498,633 2,239,634 3,366,983 $ 24,892,083 $ ==~3;;;;9.,;;,5;;;;3;;;;5~37;,,,4;,,, JEFFERSON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities EXPENSES CHARGES FOR SERVICES $ 16,509,506 $ 951,704 744,424 472,356 750,208 1,659,600 335,633 1,771,951 1,227,259 71,705 376,960 108,813 1,630,905 621,910 $ 27,232,934 $ 1,758 27,598 124,424 137,847 291,627 General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 13,214,727 $ 356,574 466,303 272,038 619,750 666,272 923,253 724,406 251,648 1,538,142 $ 19,033,113 $ 268,206 $ 13,920 2,264 601 94,050 30,185 409,226 $ -3,024,815 -595,130 -278, 121 -186,398 -128,194 -993,328 -335,633 -820,499 -408,803 -71,705 -125,312 15,611 75,269 -621,910 -7,498,968 $ 4,457,969 2,299 20,396 217,853 1,420,330 8,624 2,175,558 157,226 537,606 $ 8,997,861 $ 1,498,893 23,393,190 $ ===2=4=,8=92...,0=8=3= -5- JEFFERSON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 785,821 $ 4,289,332 176,422 1,762,439 290,604 43,000 15,316 1,707,542 $ 3,242,036 417,250 162,972 497,277 $ 25 2,990,640 7,531,368 593,697 1,925,411 290,604 43,000 15 316 Total Assets $ 7,362,934 $ 5,529,800 $ 497,302 $ ===1;.;;3;,3;,;;;9~0,~03:;;,;;6;,,, LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 741,401 $ 1,566 $ 2,628,735 760,811 260,595 35,183 $ 3.405,319 $ 1,022,972 $ $ 605,652 15,316 $ $ 4,454,026 $ 497,302 3,336,647 $ 3,957,615 $ 52,802 4,506,828 $ 497,302 $ 742,967 2,628,735 760,811 260,595 35183 4.428,291 605,652 497,302 15,316 4,454,026 3,336,647 52,802 8 961 745 Total Liabilities and Fund Balances $ 7,362,934 $ 5,529,800 $ 497,302 $ ===1,;,;;3~,3;,;;;9~0,~03:;;,;;6;,,, The notes to the basic financial statements are an integral part of this statement. -6- JEFFERSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable $ 8,961,745 $ 295,348 2,865,987 1,256,429 23,753,161 3,064,400 -5 174 966 26,060,359 84,979 -10,215,000 Net Assets of Governmental Activities (Exhibit "A") $ ===2=4-=,8=92:!.,0=8=3 The notes to the basic financial statements are an integral part of this statement. -7- JEFFERSON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Refunding Bonds - Par Value Payment to Bond Refunding Escrow Agent Refunding Bond Issuance Cost Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 4,491,073 8,624 $ 16,571,917 4,636,754 291,627 60,886 569,593 $ 1,420,330 409,226 74,813 $ 26,630,474 $ 1,904,369 $ 809 $ 4,491,882 217,853 1,646,807 16,981,143 4,636,754 291,627 21,527 157,226 569,593 240,189 $ 28,775,032 $ 16,239,781 $ 16,239,781 951,704 744,424 461,415 753,486 $ 1,659,600 220,676 1,771,636 1,229,033 71,705 376,960 108,813 1,605,859 45,691 899 $ 3,494,786 1,494 951,704 744,424 461,415 754,385 1,659,600 222,170 1,771,636 1,229,033 71,705 376,960 108,813 1,605,859 3,540,477 565,000 325,373 565,000 325,373 $ 26,240,783 $ 3,495,685 $ 891,867 $ 30,628,335 $ 389,691 $ -1,591,316 $ -651,678 $ -1,853,303 $ 5,280,000 $ 5,280,000 -5,166,537 -5,166,537 -113,463 -113,463 674,015 674,015 $ -674,015 -674,015 $ -674 015 $ 674 015 $ 0 $ 389,691 $ -2,265,331 $ 22,337 $ -1,853,303 3,567,924 6,772,159 474,965 10,815,048 Fund Balances - Ending $ 3,957,615 $ 4,506,828 $ 497,302 $ 8,961,745 The notes to the basic financial statements are an integral part of this statement. -8- JEFFERSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District"s fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the carrying value of the building sold. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: Refunding Bonds issued Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements $ -1,853,303 $ 3,701,446 -461 045 3,240,401 -11,218 -31,987 -5,280,000 5,435,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ====1,=49=8=,8=93= The notes to the basic financial statements are an integral part of this statement. -9 - JEFFERSON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 545 19 452 $===19='=99=7= $======1=9=9=9=7= The notes to the basic financial statements are an integral part of this statement. - 11 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Jefferson County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Jefferson County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 12 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and - 13 - . JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs, Federal Programs and Other Programs were reported as Special Revenue Funds. These funds had a combined fund balance of$545,936 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$91,231 at July 1, 2002. This change is in accordance with generally accepted accounting principles. - 14 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 4,011,853 Add Funds Consolidated with General Fund: School Food Services Fund Federal Programs Other Programs School Activity Account - Governmental Activity 543,607 2,099 230 91,231 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,730,341 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 2,811,437 General Fund Balance July 1, 2002 (Restated) $ 3,567.924 CHANGES IN ACCOUNTING PRINCIPLES The Jefferson County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 3,567,924 6,772,159 474,965 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable $ 10,815,048 27,580,575 -4,728,630 96,197 -10,370,000 Net Assets Beginning (See Exhibit "B") $ 23,393.190 - 15 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables - 16 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Jefferson County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on December 6, 2002 (levy date). Taxes were due on February 18, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Jefferson County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $4,470,677 and for school bonds amounted to $809. The tax millage rate levied for the 2002 tax year (calendar year) for the Jefferson County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.88 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,638,183 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. - 17 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA $ 5,000 25 to 90 years $ 5,000 90 years $ 5,000 10 to 25 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. - 18 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the Stat~ of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $4,615,541. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. - 19 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category 1 2 3 Total Bank Balance $ 684,644 3,458,353 472,544 $ 4,615.541 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $7,531,368 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. - 20- JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2002 Increases Decreases Balances June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 288,898 $ 6,450 $ 0 2,865,987 0 $ 295,348 2,865,987 Total Capital Assets Not Being Depreciated $ 288,898 $ 2,872,437 $ 0 $ 3,161,335 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 23,176,296 $ 2,904,643 1,210,738 623,561 $ 159,757 45,691 46,696 $ 23,753,161 3,064,400 1,256,429 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 3,359,969 1,247,403 121,258 261,988 180,586 18 471 14,709 3,607,248 1,427,989 139,729 Total Capital Assets, Being Depreciated, Net $ 22,563,047 $ 367,964 $ 31,987 $ 22,899,024 Governmental Activity Capital Assets - Net $ 22,851,945 $ 3,240,401 $ 31,98:Z $ 26,060,352 Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 269,725 $ 10,941 849 1,527 152,957 166,274 25,046 $ 4612045 - 21 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Capital Acquisitions $ 1,649,885 $ $ 3,242,036 $ 4,855 497,277 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfers From District-wide Capital Projects Debt Service Funds $===6-74-,0==1==5 Transfers are used to move prior years' Special Purpose Local Option Sales Tax (SPLOST) proceeds to the Debt Service Fund for payment of bonds. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years. -22- JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: RISK MANAGEMENT The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 7 894 $ 0 $ 7 894 $ 0 $ 0 $ 332 $ 0 $ 332 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Employee $ 30,000 $ 10,000 Note 9: OPERATING LEASES Jefferson County Board ofEducation has entered into various leases as lessee for office equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2003, for governmental funds amounted to $34,409. Future minimum lease payments for these leases are as follows: - 23 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: OPERATING LEASES Year Ending Governmental Funds 2004 2005 2006 2007 $ 33,658 32,748 32,748 19,103 Total Note 10: LONG-TERM DEBT $====1==18-,2=5==7 ADVANCE REFUNDING During fiscal year 2003, the Jefferson County Board of Education issued $5,280,000 in General Obligation Refunding Bonds to advance refund $4,870,000 ofoutstanding bonds. The bond issue of $5,280,000 less underwriters and bond issue cost of$113,463 provided net proceeds of$5,166,537. The total net proceeds were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the 1993 Bond issue. As a result, the 1993 Series Bonds are considered defeased, and the liability for these bonds has been removed from the District-wide Statement of Net Assets. The Jefferson County Board of Education refunded the aforementioned bonds to reduce its total Debt Service payments over 16 years beginning subsequent to fiscal year 2003 by $276,762 and to obtain an economic gain (difference between the present values of total debt service payments and the old and new debt) of $247,367. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2001 General Government - Refunding - Series 2002 3.60% 3.80% $ 5,200,000 5,015,000 $ 10,215.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: -24- JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 10: LONG-TERM DEBT Governmental Funds General Obligation Bonds Balance July 1, 2002 $ 10,370,000 Additions G.O. Bonds 5,280,000 Deductions Debt Retired 5,435,000 Balance June 30, 2003 $ 10,215.000 Portion of Long-Term Debt Due within One Year $ 575,000 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 2009-2013 2014 - 2018 2019 $ 575,000 $ 1,110,000 1,340,000 1,550,000 1,555,000 1,610,000 2,015,000 460,000 188,885 353,080 312,605 263,745 206,450 629,280 285,475 8 740 Total Principal and Interest $ 10,215.000 $ 2,248,260 Note 11: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $275,417 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. - 25 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 11: ON-BEHALF PAYMENTS Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $228,856 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $46,561 Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available: Project Unearned Executed Contracts Funding Available From State Various School Additions/ SA/0lS-6811-2253 $ 1,936.945 $=="""45"""4='=6===9 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. - 26 - JEFFERSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 14: RETIREMENT PLANS TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2003 2002 2001 100% 100% 100% $ 1,323,685 $ 1,256,078 $ 1,437,434 - 27 - JEFFERSON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 4,220,000 $ 4,452,000 $ 4,491,073 20,000 8,624 17,028,235 16,578,111 16,571,917 5,384,549 5,404,549 4,636,754 137,934 147,934 291,627 5,103 95,103 60,886 216189 96189 569,593 $ 26,992,010 $ 26,793,886 $ 26,630,474 $ 16,851,396 $ 16,769,956 $ 16,239,781 1,217,200 780,231 446,589 846,637 1,304,901 265,500 1,744,254 1,168,955 11,472 441,457 1,763,215 50000 1,101,273 774,687 451,778 716,082 1,372,408 213,415 1,763,956 1,247,581 11,472 441,457 1,760,216 50,000 951,704 744,424 461,415 753,486 1,659,600 220,676 1,771,636 1,229,033 71,705 376,960 108,813 1,605,859 45691 $ 26,891,807 $ 26,674,281 $ 26,240,783 $ 100,203 $ 119,605 $ 389,691 18,791,284 18,791,284 3,567,924 $ 18,891,487 $ 18,910,889 $ ===3='=,9=5=7=,6=15= See notes to the basic financial statements. - 29 - JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Pass-Through From Office of School Readiness Food and Nutrition Program Summer Food Service Program for Children Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Capacity Building Improvement Flow Through Preschool Total Special Education Cluster Other Programs Direct Safe and Drug-Free Schools and Communities 21st Century Community Learning Centers Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Grants to Local Educational Agencies State School Improvement Grants Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title V Innovative Education Program Strategies Title VI Rural and Low Income Schools School Renovation - Schools Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant Total U. S. Department of Education - 30 - CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.559 N/A N/A $ N/A $ (2) 1,399,412 16 064 1,415,476 10.550 N/A $ 72 196 1487672 . 84.027 .. 84.027 84.173 84.184 84.287 . 84.332 84.010 84.218 84.281 84.318 84.367 84.298 84.358 84.352 84.186 84.048 N/A $ N/A NIA $ 14,152 337,867 51 814 403,833 287,261 188,535 N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A $ 63,713 1,364,454 13,718 17,930 41,509 299,979 34,265 75,688 120,000 32,959 91 746 3,035,590 JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Health and Human Services, U. S. Department of Direct Rural Health Outreach Program Pass-Through From Georgia Department of Human Resources Male Involvement Block Grants for Prevention and Treatment of Substance Abuse Grant-in-Aid Total U. S. Department of Health and Human Services Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 93.912 93.558 93.959 $ NIA 56,572 25,442 N/A 47 250 $ ----"12=9=2=-=6'-'-4 $ _ _ _ _5=0=5=-=3'-'-4 Total Federal Financial Assistance N/A = Not Available $ =====4,'=7=03,a!,,0=6=0 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($321,123) were not maintained separately and are included in the 2003 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Jefferson County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 31 - JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Community Affairs, Georgia Department of Governor"s Discretionary Funds Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Statewide Local Education Improvement 4-8 After School Program K-3 Reading Program Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options Georgia State Financing and Investment Commission Reimbursement on Construction Projects GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND $ 12,500 $ 568,668 231,619 1,333,478 1,008,578 788,784 551,475 1,871,382 1,412,238 626,899 13,146 361,693 733,737 136,508 121,205 50,283 143,497 272,339 93,780 60,908 381,043 642,800 878,348 542,692 120,184 19,000 82,638 13,018 27,853 247,609 1,470,486 116,776 478,462 -354,107 228,857 2,733 79,305 227,627 37,917 49,614 8,438 72,114 1,180 $ 409,226 TOTAL 12,500 568,668 231,619 1,333,478 1,008,578 788,784 551,475 1,871,382 1,412,238 626,899 13,146 361,693 733,737 136,508 121,205 50,283 143,497 272,339 93,780 60,908 381,043 642,800 878,348 542,692 120,184 19,000 82,638 13,018 27,853 247,609 1,470,486 116,776 478,462 -354,107 228,857 2,733 79,305 227,627 37,917 49,614 8,438 72,114 1,180 409,226 - 32 - JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Education, Georgia Department of Student Information System GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 699,366 46,561 $ 699,366 46,561 58686 58686 $ 16,571,917 $ 409,226 $==1=6=,9=8=1'=14=3= See notes to the basic financial statements. - 33- JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30 2003 SCHEDULE "4" PROJECT Louisville Middle School - New heating and cooling equipment, renovations to existing buildings and wings and expanding, renovating and modifying existing structures, wiring for computers, modernizing seventh grade restrooms and cafeteria and resurfacing the parking lot. Wrens Middle School - Reroof Wing C, new heating and cooling equipment, renovation of Wing A, renovation of restrooms on Wings B and C, expansion, renovation and modification of existing structures, wiring for computers, new lights and ceiling in cafeteria, painting and reroofing gymnasium. Louisville Academy - Reroof existing buildings, modernize the kitchen and cafeteria, renovate existing wings, replace the television distribution system, construct a new physical education building, install wiring for computers, construct covered walkways, resurface paved areas and correct existing drainage problems. Capital expenditures related to the capital outlay projects described above including removal of underground storage tanks and environmental clean up activities and purchase of related equipment. Additionally, all funds remaining after completion of these capital expenditures plus interest earned will be used to retire existing bonded debt. To retire previously incurred general obligation debt of the School District. Acquiring, constructing and equipping renovations and improvements and other capital outlay projects at Carver Elementary School, Louisville Middle School, Jefferson County High School, Wrens Elementary and Wrens Middle School and to purchase five new school buses. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) (5) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 1,636,536 $ 1,350,422 $ 66,586 $ 1,283,836 Complete 1,227,747 1,103,043 78,676 1,024,367 Complete 1,166,981 866,320 40,930 825,390 Complete 1,104,834 277,979 277,979 Complete 2,154,925 2,260,000 6,623,719 2,260,000 674,015 217,853 5,949,704 Ongoing 121,680 Ongoing 7 740 000 7 740 000 3,338,313 141 080 Ongoing $ 17,291,023 $ 20,221,483 $ 4 416 373 $===9,=62=4=,0=36= (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Jefferson County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest expense to provide advance funding for the above projects as follows: Prior Years $ ==6._7.o.,.s.,.4.8.. (5) During fiscal year 2003, the Jefferson County Board of Education issued General Obligation Refunding Bond Issue 2002 to refund portions of the 1993 Bond Issue. The amount expended in the Current Year includes debt service on the replacement refunding issues. See notes to the basic financial statements. - 34- JEFFERSON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 638,098 $ 749,682 $ 19,436 $ 769,118 264,665 233,059 1,716 234,775 1,517,261 1,759,037 107,987 1,867,024 1,102,264 973,954 16,178 990,132 903,191 1,118,011 77,028 1,195,039 589,772 2,087,930 1,582,825 705,709 1,389,170 129,386 59,786 160,345 487,975 2,098,920 1,953,860 563,960 356,868 779,528 153,398 79,632 46,211 197,087 2,808 126,954 93,834 81,568 4,271 13,109 2,299 2,061 384 1,782 490,783 2,225,874 2,047,694 645,528 361,139 792,637 155,697 81,693 46,595 198,869 $ 11,130,402 $ 11,551,182 $ 551,415 $ 12,102,597 305,405 68,379 406,783 15,958 37,565 70,339 444,348 86,297 TOTAL QBE FORMULA FUNDS $ 11,504,186 $ 11,973,923 $ 659,319 $ =====1=-2,=63=3=,2=4=2 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 35- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 23, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Jefferson County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofJefferson County Board ofEducation as of and for the year ended June 30, 2003, which collectively comprise Jefferson County Board of Education's basic financial statements and have issued our report thereon dated June 23, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Jefferson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Jefferson County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Jefferson County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6811-03-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we do not consider the item described above to be a material weakness. This report is intended solely for the information and use of the management, members of the Jefferson County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2003-34YB-30 sell W. Hinton State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 23, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Jefferson County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Jefferson County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Jefferson County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Jefferson County Board of Education's management. Our responsibility is to express an opinion on Jefferson County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Jefferson County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Jefferson County Board ofEducation's compliance with those requirements. 2003SA-10 In our opinion, the Jefferson County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Jefferson County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Jefferson County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Jefferson County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2003SA-10 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS JEFFERSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6811-01-02 FS-6811-02-01 Further Action Not Warranted Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Jefferson County Board ofEducation's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Jefferson County Board ofEducation disclosed a financial statement reportable condition related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Jefferson County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Jefferson County Board ofEducation did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Jefferson County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Jefferson County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Jefferson County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls Reportable Condition Finding Control Number: FS-6811-03-01 Our examination of the principals' accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. General Ledger A certificate of deposit in the amount of $12,334 was not recorded in the School District's general ledger. June's financial activity for the two schools tested was not recorded in the School District's general ledger. The June 30, 2003 general ledger cash balance was reconciled to the May 2003 bank statement. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions, at the various school sites, and failure to establish adequate controls for the above categories. Management should implement procedures to ensure that all transactions are processed according to established procedures and recorded in the general ledger. -2- JEFFERSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3-